In a decision handed down late last week by the U.S. Court of Appeals for the Tenth Circuit, a three-judge panel affirmed a November 2010 decision from the U.S. District Court for the District of Wyoming granting FDA’s Motion to Dismiss a lawsuit brought by Cody Laboratories, Inc. and Lannett Co., Inc. (collectively “Cody/Lannett”) concerning the alleged grandfather status of Cody/Lannett’s marketed unapproved Morphine Sulfate Solution. The Circuit Court also dismissed as moot Cody/Lannett’s claim of disparate treatment at FDA concerning the same drug submitted under an NDA.

The Cody/Lannett lawsuit stems from FDA’s March 2009 Warning Letters to Cody and Lannett (among other companies) to stop manufacturing certain unapproved narcotic drugs, including morphine sulfate oral solutions. At that time, FDA concluded that marketed unapproved morphine sulfate products are “new drugs [under the FDCA] and not grandfathered and that manufacturing and marketing of these products without an approved application constituted a violation of the Act.” In subsequent communications with Cody/Lannett, FDA stated that the Agency would exercise enforcement discretion with regard to the shipment and distribution of Cody’s/Lannett’s unapproved Morphine Sulfate Solution until July 24, 2010, which is 180 days after FDA approved Roxane’s NDA for the drug product. Meanwhile, in late February 2010, Lannett submitted its own NDA (NDA No. 201517) to FDA for Morphine Sulfate Oral Solution, 100 mg per 5 mL (20 mg per mL), which NDA was not granted a 6-month priority review as was Roxane’s NDA.

Cody/Lannett sued FDA arguing that the Agency should be enjoined from taking enforcement action after July 24, 2010 if such enforcement action is based on the Agency’s contention that Morphine Sulfate Solution Immediate-Release 20mg/mL is an unapproved “new drug,” and that the court should issue a declaratory judgment that FDA violated the Administrative Procedure Act (“APA”) in determining that the product is a “new drug.” Cody/Lannett raised three issues in the litigation: (1) FDA’s alleged determination that Cody/Lannett’s product is a “new drug;” (2) FDA’s alleged failure to develop an administrative record for its determination that Cody/Lannett’s Morphine Sulfate Oral Solution 20mg/mL product is a “new drug;” and (3) FDA’s alleged disparate treatment of Cody/Lannett’s standard review NDA compared to Roxane’s priority review NDA.

In a November 16, 2010 decision, District Court Judge Alan Johnson granted FDA’s Motion to Dismiss the case, and ruled that the court “does not have jurisdiction over any of the agency actions [Cody/Lannett] ask this Court to review, as the FDA has yet to complete a final agency action,” and that “[a]ny attempt to review such actions would be premature and contrary to law.” Following Judge Johnson’s decision, Cody/Lannett appealed the decision to the Tenth Circuit. On June 23, 2011, FDA approved Lannett’s NDA No. 201517.

Not long after FDA approved NDA No. 201517, the Agency filed a Motion to Dismiss the Tenth Circuit case on mootness grounds, arguing that as a result of the approval of NDA No. 201517, “there is no likelihood that FDA will undertake enforcement action against Cody for marketing unapproved morphine sulfate, which is what Cody sought to prevent when it filed its complaint.” Cody/Lannett opposed FDA’s motion, arguing that the manufacture and sale of its morphine sulfate under an approved NDA will result in significant administrative and financial burdens (e.g., user fees) – see our previous post here. Moreover, says Cody/Lannett, “FDA could still pursue enforcement actions with respect to past sales of the Product.” Thus, the grandfather status of Cody/Lannett’s Morphine Sulfate drug product is not moot and is “still a live issue between the parties.” Likewise, Cody/Lannett argue that their disparate treatment claims are also live and subject to judicial review, because, among other things, they are capable of repetition with other allegedly grandfathered products the companies manufacture and distribute (e.g., oxycodone and topical cocaine) and for which they reportedly plan to seek FDA approval.

Although the Circuit Court, in affirming in part and dismissing in part the district court decision, agreed that the approval of NDA No. 201517 did not moot Cody/Lannett’s grandfather drug claim, because “[b]y prevailing on its grandfathering claim, Cody could still obtain meaningful relief in the form of freedom from [certain user fee and labeling] burdens,” the Court refused to reach the merits of Cody/Lannett’s grandfather drug claim.

Mootness aside, we cannot reach the merits of Cody’s grandfathering claim unless the FDA has engaged in “final agency action” under the APA. . . . Cody’s failure to avail itself of available administrative remedies [(i.e., use of the citizen petition process)] defeats its claim even if we were inclined to hold that the FDA’s action [(i.e., Warning Letters)] were otherwise final. . . . Given that grandfathering status hinges on the fact-intensive history of the drug’s marketing and use, we do not anticipate that the agency will blindly refuse to consider evidence submitted by Cody. Accordingly, we decline to consider Cody’s grandfathering claim prior to exhaustion of the company’s administrative remedies.

And with respect to Cody/Lannett’s claim of disparate treatment by FDA, the Court says that FDA’s approval of NDA No. 201517 mooted the claim, stating that Article III does not permit the Court to issue a retrospective opinion that Cody/Lannett were harmed. “Nor does Cody’s disparate treatment claim fall under the exception to the mootness doctrine for disputes that are capable of repetition, but evading review. To fit within that exception, a litigant must show a reasonable expectation that it would be subjected to the same adverse action in the future.” Although Cody/Lannett say they plan to submit NDAs to FDA for certain allegedly grandfathered drugs, “Cody has not given us reason to expect that the agency will deny Cody’s request for expedited review while granting that of its competitors. Thus, we conclude that Cody has not carried its burden of demonstrating its claim is capable of repetition, but evading review.”

Whether the Tenth Circuit’s decision marks the end of this long-running dispute remains to be seen. Cody/Lannett could take further action in court or at FDA.